PROTEZIONISMO. — Protectionism forms part of that artificial system of expedients and manoeuvres which constitutes economic policy.
I. PROTECTIONISM AND FREE TRADE
1. Antagonism. - The antagonism between free traders and protectionists reproduces the age-old one between theory and practice—or, better still, between incomplete and imperfect theories and disorderly empiricisms. More precisely, the antagonism is between pure economics and practical economics: the latter, in the absence of a genuine applied economic science, being reduced to the practice of business and to the economic policy of governments. Since pure or theoretical economics has so far failed to provide rational solutions to the problems of reality, free traders are needlessly scandalized when confronted with the assertion that international exchanges do not ensure equal and reciprocal advantages to the two contracting parties, but rather inevitably harm one of them, permitting the undue enrichment of the other. In this way they perpetuate the illusion of the first economists, who believed that a new science of social life could, in its applications, disregard the deep-rooted customs of an economic process already centuries old, and the differing conditions of development among nations, which are still manifested in the imbalance of prices in general, and of the prices of labor in particular.This imbalance, if the dangers of p. are to be avoided, must be remedied by economic means: replacing the barbarous preconception of necessary struggle, and the confused episodes of that struggle, with the clarifying and orderly advance of science, and with a beneficial international division of labor in an atmosphere of peaceful agreements and free exchanges, governed by self-interest (v.).
2. From p. to planning. - While free trade, however, represents a natural and logical state of economic life, and therefore possesses scientific value at least as a hypothesis and an ideal tendency, p. forms part of that artificial system of expedients and maneuvers which constitutes economic policy: a system of privileges and stimulants which, because of the retaliations and reprisals it provokes, soon proves insufficient and must be intensified, thereby ruining, like all stimulants, the material and moral health of individuals and society.
P. arose from the need to protect the emergence, preservation, and prosperous development of national industry, agriculture, and also commerce, from competition by similar foreign industries, agricultural activities, and commerce. It is a corrective to the lower prices of foreign goods and labor compared with domestic ones, implemented chiefly by bringing those prices up to or above the domestic level through the payment of customs duties on imports.
Other expedients of economic policy, within the framework of the same purpose, are export subsidies, licensing systems for imports, quotas and compensation arrangements, prohibitions on the introduction of certain goods or on immigration, as well as various kinds of currency measures. These are supplemented by provisions of an exclusively domestic character, such as control over new industrial installations, manipulation of manufacturing taxes, contributions, tax concessions and exemptions, and direct or indirect state financing. Together they complete the picture of what is now called “controlled economy,” or “dirigisme,” or the “third way.” All this is destined inevitably to lead to a planned economy (v. PLANNING); and finally to a nationalist or communist state economy.
Like all unnatural regulations, p. can serve excellently for a specific, limited purpose and for a not excessively long period. If, however, it rises to the status of an ordinary system of economic policy and is applied on a large scale, it rapidly loses its effectiveness, both because producers become accustomed to it and will no longer be able to do without it, and because of the reactions and reprisals of the nations affected by the system. At this point p. begins to cause serious and increasing harm to the very country that adopts it, because of the privileged positions it creates to the advantage of groups and categories, especially the least deserving, and because of the general harm to all consumers, who are forced to bear a continuous increase in prices; finally, because of the growing difficulty of trade resulting from the tariff war thus provoked. Hence, once applied in one country, p. rapidly spreads to other countries, takes root, and must be intensified: its reduction becomes increasingly difficult, and its elimination almost impossible. The continual drafting of trade treaties and new tariffs, the planned customs unions and similar measures, do not signify certain and decisive steps toward dismantling customs barriers and achieving the desired free movement of goods, people, and capital: action must be taken upon the economic causes of the system, not upon its practical manifestations.
II. HISTORICAL NOTES
Historically, protectionism traces its origins to the mercantile system of Colbert in France and of Cromwell in England in the seventeenth century; but as an idea and purpose of commercial hegemony, it has existed since the most remote times. In its present forms, protectionism began with the establishment of the confederation of the United States of North America: given the immediate reason for its formation, it was born protectionist, while implementing among its constituent states the most wholehearted and enthusiastic freedom of trade. The “economists” of the late seventeenth century condemned protectionism by celebrating free trade (laissez faire, laissez passer); and it triumphed in the struggle begun in England in 1858 by the Manchester School, particularly by Cobden, against the duty on grain (Corn lines), which concluded in 1846 under the Peel ministry. In 1872 Thiers’s France attempted protectionism in order to recover from its defeat, but without success; Germany under Bismarck, on the other hand, succeeded completely in 1879, in order to establish firmly the industrial and military power of the German Empire. From then on, one after another, with forms more or less disguised or radical, all the states began to surround themselves with tariff barriers: they were prompted to do so not only by commercial considerations and by the necessary defense of industries useful in war, but also by the demands both of the first socialist-oriented labor movements and of the first great trusts in various branches of basic industry, genuine economic and political powers within the individual states.